1. Assume that at maximum production levels, Japan can produce either 100 CD’s or 50 DVD’s. The U. S. can produce either 90 CD’s or 30 DVD’s. a. Draw the PPF curves for each of these countries producing these two products.
b. Who has the absolute advantage for each product? Why?
c. Calculate the comparative advantage for each country in both CD and DVD production and show your results. Who has the comparative advantage for each product? Why?
2. Now assume that China develops a newer technology that gives them absolute advantage over both Japan and the U. S. in both CD and DVD production.
a. Can the Chinese still benefit from trade with the other two countries? Why or why not?
b. If China committed to specializing in one good over another, would that be economically sound? Why or why not?